Economic equality!

Bitcoin offered “equality” in that anyone could mine it. But in practice, Bitcoin was substantially mined early on – early adopters have most of the coins. The design was such that early users would get vastly better rewards than later users for the same effort.

Cashing in these early coins involves pumping up the price and then selling to later adopters, particularly during the bubbles. Thus, Bitcoin was not a Ponzi or pyramid scheme, but a pump-and-dump. Anyone who bought in after the earliest days is functionally the sucker in the relationship.

“Why should I spend money to make these guys rich?” is such a common objection that the Bitcoin Wiki answered it: “Early adopters are rewarded for taking the higher risk with their time and money.” It is entirely unclear what the “risk” involved was, or how this would convince anyone who didn’t already agree.

In economics, the Gini coefficient is the standard measure of how inequitable a society is. This is tricky to determine for Bitcoin, as it’s not quite a “society” in the Gini sense, one person may have multiple addresses and many addresses have been used only once or a few times. (The commonly-cited figure of 0.88 is based on one small exchange in 2011.) However, a Citigroup analysis from early 2014 notes: “47 individuals hold about 30 percent, another 900 hold a

further 20 percent, the next 10,000 about 25% and another million about 20%”; and the distribution “looks much like the distribution of wealth in North Korea and makes China’s and even the US’ wealth distribution look like that of  a workers’ paradise.”

Dorit Ron and Adi Shamir found in a 2012 study that only 22% of then- existing bitcoins were in circulation at all, there were a total of 75 active users or businesses with any kind of volume, one (unidentified) user owned a quarter of all bitcoins in existence, and one large owner was trying to hide their pile by moving it around in thousands of smaller transactions.

(Shamir is one of the most renowned cryptographers in the world and the “S” in “RSA encryption”; of course, Bitcoiners attempted to disparage his credentials and abilities.)

The usual excuse is to say that it’s still early days for Bitcoin. However, there are no forces that would correct the imbalance.

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